Testing the SDG targets on water and sanitation using the world trade model with a waste, wastewater, and recycling framework
In this article, we employ an extended world trade model and rectangular choice of technology (WTM/RCOT) framework, which minimizes global factor costs subject to satisfying final demand and respecting region-specific factor constraints, to calculate the economic costs of achieving the United Nations Sustainable Development Goals (SDGs) for water and sanitation. We estimate how achieving these goals will affect factor use, trade balances, scarcity rents, and production in 19 regions of the world, drawing on an expanded database developed from the GTAP9 database, the developed model involves 64 technology columns and 74 rows of factors of production. On a theoretical level, this model contributes to the existing literature on the topic by using endogenous cost estimates that consider shifts in production and factor scarcity rents and by considering recycling and wastes within an input-output model, in which wastes can be modelled as input resources as well as waste outputs. We find that the additional factor costs of meeting the water and sanitation targets of the SDGs exceed US$100 billion annually, with a total cost of US$3.3 trillion from 2015 to 2030. These figures are similar to other recent works on the subject despite methodological differences. It also suggests that the worldwide SDG targets can be achieved with moderate costs relative to the total global GDP, especially in comparison to the high estimated cost of inaction. Predictably, in areas working toward water and sanitation SDGs (areas such as Sub-Saharan Africa, regions in South Asia, etc.), factor use costs increase, but not commensurately with the growth of coverage—some regions, such as areas of South America, notably have higher factor use costs along in proportion to the coverage. Indeed, Sub-Saharan Africa, which needs the highest increase in coverage, will not likely have as large increases in factor uses and would barely get scarcity rents. In general, regions with higher SDG targets will require further trade, especially additional imports of inputs such as chemicals and energy products. This trade will increase factor earnings in factor rich regions such as the European Union, Japan, and Korea.